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Cash Flow Management with Invoice Finance

Invoice discounting and factoring are targeted ways to benefit your business cash flow. One thing all successful businesses have in common is good management of their business cash flow – this is common across all types of business and industry, not only small businesses and start ups but medium sized and larger businesses as well. If your business is having cash flow problems, then turning to invoice finance could be a good option.

Cash flow problems are some of the most common for many types of business. You might be regularly struggling to meet the demands of payroll, HMRC or suppliers, and you might always be worrying about that big unexpected bill coming in when you just don’t have the working capital to deal with it. However, if you’ve got sales on your books – even if your customers are dragging their feet in paying – you have a valuable resource against which to raise capital.

Invoice finance allows you to release the cash tied up in unpaid invoices. This means you can get a regular, predictable influx of cash flow into your business. This means you will no longer be waiting for weeks or months for customers to pay their bills, and you’ll be able to plan ahead and invest in your business. Factoring services also include a full credit collection service, where the lender will professionally collect invoices from customers, taking another strain off your shoulders. Larger businesses with inbuilt finance departments may not need this service and so should consider invoice discounting, which leave you in control of credit collection.

If your business issues credit terms of between 30-90 days on an invoice basis, then you could be eligible for invoice finance. Get your cash flow management sorted with a targeted invoice factoring programme.

Small Businesses and Invoice Collection

Has your small business got a secure infrastructure in place to deal with invoice collection? According to a new set of figures gathered by Free Agent, many small businesses are simply waiting too long to chase up invoices that customers have neglected to pay. This shows that many small business owners are giving customers a bit too much leeway when it comes to paying, to the detriment of their working capital and cash flow. Invoice factoring can help.

In this new poll of more than 500 small businesses employing 5 or fewer people, 19% of companies said that they would wait between one and two weeks to chase an unpaid invoice. This length of times seems about reasonable – but many businesses would wait even longer. Nearly a quarter (23%) said they would wait between two weeks and a month to chase up a payment, with a further 18% waiting between one and two months. At the extreme end, 4% said they wouldn’t normally chase invoices until 2 to 3 months after they were due, with 2% waiting 3 months or longer. 4% of small businesses even admitted to never chasing invoices.

This shows that for whatever reason, many small businesses are waiting a significant period of time to chase invoices up. If you’re waiting a period of months to collect payment, essentially payment terms are being doubled and it’s very hard to plan for the future when cash flow is so hard to come by. Many businesses may find that invoice collection falls through the cracks when there is no dedicated finance department – this is where factoring can help. 

Factoring not only lets your business release the money tied up in unpaid invoices but also includes a full credit collection service. The factoring lender will chase up payment professionally and efficiently on your behalf, taking the strain of invoice collection off your shoulders.

Importance of Alternative Lending

As the banks continue to fail to live up to the lending requirements of small and medium businesses, it’s becoming more mainstream than ever to look outside the banks for finance. Alternative lenders such as invoice finance providers are growing, with more and more small businesses getting the funding they need to grow. Looking for alternative finance is really becoming an essential step for businesses looking to secure finance.

Despite government initiatives such as the Project Merlin and Funding for Lending, the banks are failing to lend enough to small businesses. Entrepreneurs and the UK’s small businesses are the life blood of the economy, and if they aren’t receiving finance to help them grow and expand, it’s not surprising that economic grow is continuing to stall – it’s not the only factor involved of course, but it could be influential. The banks are becoming more averse to lending to ‘risky’ small businesses following the recession, which is understandable – however, the dominance of computerised credit scores have shaken the lending industry and often means that small businesses are turned away without a chance.

The average micro-business in the UK needs just £2,143 to set up. However, just 20% of micro-businesses are funded through a bank loan and 1 in 6 have even been driven to payday lenders. Only 1 in 10 have been able to secure a loan from their bank in the first year of trading. As such, it’s not surprising that so many businesses fail within their first couple of years.

One of the ways to combat this is to look outside of the banks for finance. For example, invoice factoring can be used by a huge range of different businesses – if you’ve got some sales on your books and sell to customers on a invoice basis, then you could benefit from factoring. By unlocking the cash tied up in unpaid invoices, your business could get a valuable injection of working capital.

Exporting for Growth

The government has long been hailing exporting as one way to inject more money into the small business sector as well as the UK economy as a whole. New research from the Federation of Small Businesses (FSB) has backed this up, showing that hundreds of millions of pounds could be added to the economy every year if more small businesses started to export their products. With alternative finance measures as well as the accessibility of ecommerce, exporting is becoming more and more viable for many small businesses – and should definitely be a route to consider.

New figures released by the FSB show that the huge sum of £792 million could be added to the economy each year if more small businesses were to undertake exporting on a wider scale. The research by the FSB indicated that 6% of its members who don’t currently export would like to expand into this area in the future. In doing so, they would add huge sums of money to the UK economy and generate greater economic activity in general. This would also help the government to reach its ambitious new targets of getting 100,000 new businesses exporting by 2020 – this could potentially add an extra £5.6 billion to the economy.

If expanding into exports is something your business is considering then now is the time to get involved. Not only are there many forms of financing that could help – such as invoice finance, which can help to raise the working capital to allow for expansions – but the UKTI is growing in awareness and is there to help new businesses. They can help not only big business but small firms as well. If you want to grow your business, then exporting should be a definite consideration. 

Invoice Finance – The Benefits

Invoice finance is a targeted way to manage your business cash flow through alternative funding, especially if your business is struggling with late payment. If customers aren’t paying on time, then it’s very hard to deal with cash flow, cope with unexpected expenses and even keep afloat day to day. There are many benefits of invoice finance which vary according to your business size and type – but which are the most common ones you will experience

First things first – improved cash flow is one of the biggest boosts your business could experience from invoice finance. Cash flow is the life blood of any business, no matter what size. Having good access to working capital allows you to grow and make the most of any opportunities that might come up, as well as helping you to cope with the opposite – those unexpected expenses that can create real strain within a business.

Factoring releases a reliable lump sum of working capital into your business. This helps day to day expenses, but it can also help you to make those big, one off purchases that you might otherwise struggle to fund. New vehicles, new staff or new machinery or anything that’s a big cash outlay can be funded through invoice finance.

Factoring lets you release a lump sum of cash into your company on a regular basis. Not only can this help day to day expenses, but you can also use this to make one off purchases that you might otherwise struggle to raise the funds for. Think new vehicle, machinery or even a new member of staff – all of which can help you to boost turnover and growth.

Another big advantage that you might experience is reducing stress around the credit collection process! Many small businesses wait too long to start chasing invoices, often due to workload and not having a finance infrastructure in place – factoring, however, has a full credit control control process built in, where the lending company will collect customer payment quickly and professionally. Larger businesses not in need of this service should look at invoice discounting services instead.

Invoice finance has a huge range of benefits – take a look to see how it can benefit your business.

SMEs and Unpaid Invoices

Is there a good infrastructure for chasing invoices within your business? New research has shown that many small businesses may be damaging their cash flow prospects by failing to chase up invoice payment from customers, as well as waiting too long before they start to take action. According to FreeAgent, an accounts system provider who undertook the survey, many small businesses could be harming their cash flow by giving customers too much leeway when it comes to payment terms.

In this survey, many small businesses ended up giving customers weeks or even months before they started to chase up payment. The poll, carried out with YouGov assistance, showed that just 14% of small business owners would chase up an invoice the first week after it was due. More than 500 people were interviewed, all of whom own businesses with five or fewer members of staff.

Around 19% of respondents said that they would wait one to two weeks before chasing up an unpaid invoices, with nearly a quarter (23%) saying they would wait between two weeks to a month before doing so. 18% would wait between one to two months before chasing up a payment, whereas 2% said they would wait more than three months before requesting payment. What’s more, 4% admitted to never chasing up unpaid invoices at all.

Failing to chase up payment from customers could be damaging business cash flow for many of these companies. If the strain of invoice payment is harming your business, then it could be worth looking into factoring services – these can help small businesses by including a full credit collection system, as well as helping you to release the money tied up in unpaid customer bills. Staying on top of invoices is hugely important – don’t let late payment drag your business down.


Cash Flow Concerns for Small Businsses

Cash flow is still one of the big concerns for many companies within the UK economy, especially when it comes to small businesses. According to a recent survey by recruitment specialists Robert Half UK, cash flow is one of the most significant concerns for a huge number of CFOs within the UK’s small businesses. Cash flow is the life blood of any business, no matter the size, but addressing the problem can often be tricky – this is where invoice finance can help, especially if your business is struggling with late payment from customers.

According to the survey, more than 4 in 10 (41%) of CFOs in the UK wide interviews said cash flow was one of the biggest concerns in the running of their company. Specifically for small and private companies, this figure rose closer to half (46%). This shows that while cash flow is a general concern for many larger businesses as well, it’s extremely pervasive when it comes to businesses on the smaller end of the scale.

Regionally, businesses in the North and Scotland were most concerned with cash flow(48%), compared to London and the South East where ‘only’ 37% were concerned about their cash flow. There are more figures to reveal why this might be the case – the North and Scotland suffer most from late customer payment (71%) as well as from the problems of competitive pricing and low margins (54%). 

6 in 10 of those interviewed said the main problem leading to cash flow issues was late customer payment, rising from just over a quarter in 2011. Late payment is a hard problem to solve, especially for small businesses caught up in supply chains, and despite government initiatives to help. Invoice finance is one targeted way to ease the problem – by unlocking up to 90% of the value of your invoice within 24 hours, late payment no longer needs to be a crippling cash flow problem.

SMEs Optimistic for 2013

What are your feelings about the 2013 business year? According to the latest figures from AXA Business Insurance, more small to medium sized businesses are feeling optimistic about the year to come. Comparing to last year, their annual Optimism Index paints overall a positive picture for UK businesses. 8 out of 10 businesses interviewed are feeling optimistic about their business’ prospects in the coming year, and the majority are even expecting to experience growth – great news not only for the small businesses themselves, but also for the UK’s wider economic predictions.

The index, compiled by AXA, one of the largest business insurers in the UK, shows that this time last year only 35% of small and medium businesses were optimistic about their company growing over the coming year. Today, that figure has risen to 63%, showing some real improvements in optimism as well as showing the more positive economic position of many small businesses.

More businesses are also planning to invest further to allow for themselves to grow. 38% of SMEs are planning to take on new staff – great for the employment rates – compared to 9% last year (although in the end, 35% of SME ended up taking on new staff). 53% are also planning to invest in new equipment or other, non-employee resources, which doubles last year’s figure of 25%.

This all paints a very positive picture of SME mindsets looking forward to the second half of 2013. If your business is looking to make the most of the opportunities that the year has to offer, then taking advantage of the UK’s increasingly diverse lending environment is a must. While the banks may be failing to plug the SME lending gap, there are many independent lenders that can help with products such as invoice factoring and invoice discounting. 

Online Funding

Online finance is one of fastest growing and most current ways that small businesses are finding their business funding. It’s based upon a simple premise – that the internet can open up new, independent and alternative options, matching businesses to their best possible form of finance, not just restricting them to the traditional bank loans and overdrafts. This has lead to a diversified lending environment, where peer to peer lending, invoice finance, asset based lending and crowd funding are starting to really grow, offering businesses great options for finding the right finance for their circumstances.

Some of the newest online finance forms include crowd funding, which takes advantage of the reach of the internet to connect investors and businesses from around the world. This allows for smaller investments to find their way into smaller businesses, helping small companies and start ups with funds that the banks might otherwise not be able, or willing, to offer. However, though this funding is growing fast, it’s still not fully regulated and there are risks to investors and businesses should they run into trouble. This is one finance measure for the future, as the internet connects more businesses to the finance that they need.

The internet also allows finance companies to offer a greater range of services, with companies offering new ranges of older products such as invoice finance and peer to business loans through the web. Small businesses stand to gain a lot from the internet finance revolution, as they have expanding options that would otherwise not be available to them through the more traditional channels. The Breedon report showed that a funding gap of £191 billion could open up by 2017 – and internet funding is working hard to fill this gap.

Invoice Finance: Growing in Value

Asset based finance is becoming increasingly valued by small firms, according to the latest figures from the asset based finance association (ABFA). As economic recovery continues to strengthen, this shows that asset based finance options such as invoice finance are becoming increasingly important not only to small businesses, but also to the economy as a whole. More companies are turning to invoice finance especially as it proves to be a great tool for combatting late payment, boosting cash flow and helping growth through injections of working capital.

Amongst firms with a turnover of £0-£500,000 there was a 3% increase in firms using invoice finance facilities, such as factoring and invoice discounting, over the last quarter. This takes the number of small businesses using invoice finance facilities to over 15,000 in the UK market, which is the highest figure for more than three years. This shows that invoice factoring is becoming increasingly important to the UK economy and the small businesses within it.

The benefits are clear – on average, sales from businesses using asset based finance have risen 9% when compared to this time last year, which values total sales at £63 billion. In terms of volume of invoice finance funding, £16.3 billion worth of funding was provided to businesses during 2013 so far, which shows another increase of 6%. Overall, lending from traditional forms of finance has contracted since 2012 by figures of 2%, showing just how instrumental invoice finance is becoming in allowing for a healthy small business sector.

Invoice factoring and invoice discounting are both useful forms of asset based finance, available for all types of business from start ups to medium sized businesses with million pound plus turnovers. Flexible, accessible and quick to secure, this type of financing is becoming more and more important to the UK’s small businesses.

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